Texas water case is 'takings' on steroids

Farmers want $500 million in damages from Mexico, but critics say the water wasn’t theirs in the first place

Jo Jo White, on the Lower Rio Grande, is spokesman for a
group of farmers andirrigation districts suing Mexico for failure
to deliver more than 1 million acre-feet of water over a 10-year
period

JOE HERMOSA, VALLEY MORNING STAR

Jimmie Steidinger and Bobby Sparks cultivate grapefruit, oranges, cotton and sugarcane on the flatlands along the meandering lower Rio Grande in south Texas. They’re among hundreds of small farmers on the U.S.-Mexico border, one of the nation’s premier growing areas despite a mere 15 to 26 inches of rain each year. Farmers supplement the rainfall with water from the river, which is shared with Mexico under a 1944 treaty.

But Sparks, Steidinger and 27 other Texas farmers say Mexico is not delivering on its water treaty obligations. The farmers and 17 irrigation districts charge that Mexico held back water in reservoirs on tributaries to the Rio Grande in Mexico, primarily the Rio Conchos, from 1992 to 2002, and used the captured water to expand agriculture. They say that satellite imagery shows the extent of the new cultivation south of the border (HCN, 2/18/02: A river on the line). "It’s water they stole from us," says Sparks.

At the Mexican Embassy, press official Alfonso Nieto says that Mexico is moving to repay its water deficit. President Vicente Fox has promised that "the commitments of Mexico would be fulfilled," he says. Nieto blames dry conditions for the problem. "That’s why we accumulated the deficits, not for lack of political will," he says.

To resolve the water dispute, Steidinger and Sparks have contacted their congressional delegation, Texas Gov. Rick Perry, the U.S. State Department, the International Boundary and Water Commission, which monitors the water treaty, and even President George W. Bush, all with little success.

Now, the farmers and the irrigation districts have taken a unique legal approach under the 1994 North American Free Trade Agreement (NAFTA). Citing NAFTA’s Chapter 11 provision, which protects corporate investments, the irrigators have demanded $500 million in damages from Mexico.

Jo Jo White, general manager of the Mercedes Irrigation District, the largest district in the lower Rio Grande Valley, says Mexico’s failure to deliver water means that it "has taken property from another country and has not compensated for it." In recent wetter years, Mexico has delivered more water. But White says even if all of the alleged deficit is repaid — it currently stands at 740,000 acre-feet — the Texas farmers still want the $500 million to pay for damages incurred when the water was withheld.

Nancie Marzulla, an attorney representing the farmers, says the Texas water case resembles "takings" cases such as the $1 billion lawsuit against the U.S. Bureau of Reclamation filed by Klamath Basin farmers, who claim losses from measures taken to protect endangered salmon. "In takings cases, we often use the word ‘expropriated,’ " says Marzulla. "NAFTA uses the word ‘expropriated.’ "

Marzulla, formerly of the Mountain States Legal Foundation, and her husband, Roger, who was assistant U.S. attorney general under President Ronald Reagan, operate a law partnership in Washington, D.C. The couple’s private law firm is representing the farmers, but the Marzullas also run a nonprofit legal foundation, Defenders of Property Rights. Its board of advisors includes Sens. Larry Craig, R-Idaho, and Orrin Hatch, R-Utah, former Reagan administration attorney general Edwin Meese, and Robert Bork, a controversial Reagan-era U.S. Supreme Court nominee. Interior Secretary Gale Norton is a former board member.

Whose water is it?

Corporations have invoked Chapter 11 about two dozen times since NAFTA’s inception, resulting in the payment of several million dollars in claims. One case involves Methanex, a Canadian manufacturer of a gasoline additive banned by California because it contaminates groundwater. Now pending before NAFTA, the case would force the state to drop its ban, or else the U.S. government would be required to pay the company almost a billion dollars in alleged losses. In another instance, the Mexican government had to pay damages when a U.S. company was prevented from opening a dump in Mexico.

Under NAFTA’s system, claims are decided in secret by a three-person tribunal, and decisions cannot be appealed. Critics argue that NAFTA tilts the scales toward corporations at the expense of communities and citizens. Martin Wagner, an international affairs attorney with the nonprofit law firm Earthjustice, says Chapter 11 is "like a sophisticated extortion racket."

Wagner says the Texas water case treats water as a privately owned commodity, when in reality it is a public resource. The water is owed to the U.S. government, he says, not to farmers with water rights.

Representatives of environmental groups and lawyers experienced with Chapter 11 NAFTA claims say the trade agreement is inappropriate for resolving a border water dispute. "It’s takings on steroids," says Juliet Beck, a California-based water analyst with the consumer watchdog group Public Citizen. "It’s totally unprecedented, using NAFTA to trump a treaty."

But Marzulla insists that the farmers have a legal right to the water, which is "permitted and adjudicated" by the state. And although the farmers don’t have direct investments in Mexico, the water owed to them under the treaty "is in Mexico," she adds.

Marzulla says she doubts the Rio Grande case will set any sort of precedent, nor does she expect to invoke the NAFTA-Chapter 11 approach in other disputes even if she prevails. "It’s a pretty extraordinary circumstance," she says.

Meanwhile, representatives of the International Boundary and Water Commission and State Department both say they are working to resolve the dispute. The commission "neither supports nor condemns (the farmers)," says Sally Spener, public affairs officer at the agency. "It’s a completely baseless claim," says Mary Kelly, senior attorney and program director for U.S./Mexico Border Initiative at Environmental Defense in Austin, Texas. Not only is the amount of the water deficit alleged in the claim "greatly exaggerated," Chapter 11 is intended to protect companies investing in another country, not in a cross-border situation, she says. "Somehow (the farmers’ efforts) have been sold on the idea that it is possible to use a very novel interpretation."

A 90-day period for Mexico to respond expired in late November, allowing the farmers to pursue their arbitration and compensation claim.